[music] Yeah, thank you for the warm welcome and good morning everyone. Uh welcome to my presentation on the state of crypto. Uh now that the market is turning again, I think uh it's a good time to talk about crypto assets. Um over the next 20 minutes, um my aim is to provide you a framework for what could be the next cycle. Uh but I also want to look back um because this asset class is really about avoiding mistakes.
And so uh we have data going back. So our indexes start in 2015. So I'm focusing here on our top 100 universe and uh so I analyzed over 2,300 tokens and try to find stable patterns. Now I think there are two truths uh in crypto. Um, and if you focus on the top left graph, uh, you just see that crypto is super concentrated and that's a pretty constant relationship.
Yeah. So, roughly speaking, the top 10 coins make up 90% of the total market cap, give or take. Yeah. Depending on where we are in the cycle, but overall, no material change over time. And the other thing is um if you look at uh the top five universe and the cumulative tickers ever reached that it's just 26 tokens out of millions of tokens that's pretty small and if I look at our own top five index that didn't change basically since 2 years or so just constant so a lot of people hate that but um I call it design of maturity And I come to that on a later slide but keep that in mind and I don't think that this phenomenon of concentration will change a lot.
Now another thing is in crypto we always have the tendency to buy the smaller tokens to make up for the coins we didn't hold. And uh unfortunately yeah we have a size premium in equities but we don't have a size premium in crypto. What you see here is our size indexes. Yeah. So the purple line is our large cap index.
Uh the blue line is the midcap and the red line is our small cap index. And why that worked in the early innings of the first altcoin rallies yeah in 2017 2018 uh the small caps never reached an all-time high in the following cycles. And also when you do relative analysis small caps by large caps they continuously underperformed and are down 97%. And this whole thing even accelerated with the advent of the Bitcoin ETFs. Yeah.
You see the divergence is getting even larger between the large caps and the small cap tokens. And even if you go deeper and you abandon the top 100 universe and you go to top 100 one to 200 and I want to highlight that because I always see that on X uh the these these pump and dump schemes um on paper it it works. Yeah. So what I did here is uh I I took that micro universe and and rebalanced annually from 2015. Yes, you can do 579x But I if I drop out just 2017, it's just 5.
5x. It's basically one year. And if I screen for liquidity and volume, it's point4, meaning you're losing every year minus 19%. So in other words, the majority of you is just losing money by buying these super small tokens. Yeah.
So keep that in mind. uh because I think it's not necessary to go really deep into the micro structure um and I come to that in a second. So basically what is working? Yeah, I provided you the top down view with our large broad indexes. Um, but how is the situation if you do that bottom up and ask the question, what is the most consistent coin in a bull and a bare market?
Probably most of you uh will think it's Bitcoin and Bitcoin is is one of them. But there are coins doing even better. Yeah. So here we have Tron, Binance, and XRP. And uh what have I done here?
So just to explain the chart. Yeah. On the x-axis you see the bull market percentile rankings over the last three bull markets and on the y-axis you see the rankings for the bare markets. So it means how did you do in the bull and in the bare and you want to be in the green area. Yeah.
then you are an outperformer in both both bull and a bare cycle. Now people have a problem with these tokens very often. Yeah. For example, Tron. My American friends hate it.
My Asian friends love this token. But you can't deny that Tron has a massive use case as the stable coin chain for Tether for example or also Binance. Yeah. Very successful in the early days with with buyback and burn with their exchange revenue. now very successful when it comes to tokenized stocks on the Binance Smart Chain.
Um XRP also very controversial discussed but you also can't deny that they are very successful in business development doing really large corporations with credit card companies, banks and so forth. So keep that in mind. um you not just only have Bitcoin. The good message is you have some of the older tokens which can do even better. And uh you see here for example Ethereum in the middle which is a little bit surprising but Ethereum had a really horrible last cycle.
So I imagine that can change going forward. And also interesting, you see Ccash and Morero popping up here, especially doing well in a bare cycle. So that's the last three cycles. What does that mean for now? Yeah.
Which coins are invoke at the moment and why? And for that uh exercise, we've built a screener. So I'm glad that we are just coming out of a bare market because if you screen for relative strength in a bare market and you see leaders there, the likelihood that these coins are doing well in a bull cycle is relatively high. Yeah. So I show you the screener.
What have we done here? So every month we screen for coins outperforming Bitcoin over different time periods. That's one factor. The other factor is you want to see proximity to all-time highs. So how far are there are they from from the all-time high?
And we also consider volume. So I want to have liquid coins not not just a radically spontaneous trading coins and then we do an overall score and and rank that. So what you see here is maybe surprising maybe not. So basically we have one theme pretty strong the privacy theme and I think that's something also for the next cycle. Uh finance needs compliant privacy.
So these coins are more in this category be a competitor to bitcoin. Uh it's about a monetary premium. But I think there are also other protocols which could be important for hiding your compute logic in a smart contract. [snorts] Yeah. If you're a bank, you don't want to post every transaction on a public blockchain.
So maybe you want to hide that, but make it compliant if the regular regulator wants to see that. So privacy is definitely a thing. Um, but the interesting thing here is also you have Tron back again, you have Binance back again, Ethereum is popping up. Uh, you also have some of the newer tokens. Yeah, everybody knows Hyperliquid.
Uh, pumpf fun. I call it the the investment dopamine machine. So if you really look at it, put the stable coins aside, what do these coins have in common? So they all produce a ton of revenue. They all have a ton of users.
And uh finally, some of them are also nice to use. Yeah, I like to use hyperlquid. Um the RWA feature is really great. Uh if you like the social trading component, uh pumpf fun is also a good experience, right? And I also like to use uh Venice.
Yeah, I like to uh use the chat there and knowing that my data is not shared with a third company. So um and I think that investors going forward more and more will focus on which chains are revenue generating or not and that's why I come to fundamentals onchain fundamentals. Yeah, the nice thing is you can track everything in real time and um the market at the moment or for the last years basically just plate narratives. Bitcoin as the greatest example of a narrative token has nothing to do with fees. Yeah, the store of value thesis, the digital gold thesis, it's just a narrative.
Now don't get me wrong um that's important and Bitcoin has its use case but if you look at the sectors here which sectors are revenue generating it's basically the layer once and DeFi and uh especially DeFi if you look at it is just 2% of crypto's market cap yet it's 65% of its onchain fees And that's a great mismatch and I think that will um be compensated uh in the next cycle. So what is it basically? Um if you think of it the greatest critique in the last cycles where yes we have Bitcoin that's the only product market fit that's digital gold but why do I need all these other chains? Why do I need all these block space? And now I think for the first time you have a use case.
Yeah. You have stable coins, you have tokenization and I have to mention uh AI agents. Yeah. So there are studies out there that by 2029 we likely have more than 1 billion AI agents out there. So to be productive, what do they have to do?
They need to transact. They transact in stable coins. So where do these stable coins settle? on layer ones. And what do they need?
They need DeFi. Yeah, they need to change stable coins. Maybe also you have an agent for trading, you need lending, you need borrowing. Uh you need yield generation and suddenly you have a massive use case we didn't have in the other rallies or other cycles before. So in my opinion um it's the first time that we have a new cycle where these protocols make money because think of it uh Hyperlquid is doing three four millions per day.
Yeah. Pumpf fun is doing two three four millions per day. Um Robin Hood has no token also is doing $4 million per day. And think of it, we are just coming out of a of a bare market. Yeah, I'm not speaking here in the peak of a bull and fees are nice and and everybody is singing kumbaya.
Uh we are just maybe coming out of a bear and these protocols are already earning money. So and that's the reason uh why I think you can make it easy. Uh you don't have to worry about the next narrative. You just screen your tokens onchain and look who is producing fees and which protocol is having active users. I think it's pretty easy and I'm also not concerned with um are there buyback and burn mechanisms in place?
I think they all will do that over time. uh I have more the opinion that um these protocols should keep their revenue and and reinvest it in instead of distributing. But um the first thing they have to fulfill they have to show that they can produce revenues and so what we did relatively early in 2023 together with token terminal uh and it was too early because nobody was interested in these uh onchain fundamental data. But if you look at the green line, the green line is our token terminal top 10 index. And you see it did pretty well uh even in a phase where it was more about narrative.
So uh it's a live track record since 2023. The other part is back tested. So it outperformed other altcoin indexes by a huge margin uh and even Bitcoin. But I want to highlight the right graph because that's the year-to- date graph and um there's a huge divergence between these fundamental tokens and the other indexes. So this index is up year to date around 30%.
Um the average altcoin is not up year to date. Even Bitcoin is not up year to date. And so um to bring my message home uh this index doesn't invest in in super small tokens, right? There are tokens like unis swap. Yeah.
You have hyperlquid again. You have tron again. Yeah. So you don't have to go crazy uh by identifying the next super cool AI cryptocoin. It's just really doing basic fundamental data analysis.
And I think that has merits because as you know institutions they are used to it when they talk about stocks and companies they look at price to earnings price to sales and so um this is the the early innings and and for me year to date the first sign that this could work and so I predict that's my prediction I have to be careful here uh no investment advice but I think the next cycle will be more a pure altcoin cycle. driven by exactly this. That doesn't mean that Bitcoin can't perform. Bitcoin still can do well. But if you think of it, the store of value narrative should for sure be smaller in a normal world than all the other productive use cases we do on top of that.
So what what is my advice here? Stop paying for the lottery tickets. Yeah, I mean you can gamble, you can have a small proportion in your wallet doing that crazy things, but it's I don't consider that as an investment account and be just systematic. Yeah, if you do that, have a plan, rebalance and it doesn't have to be complicated. Um there are a lot of onchain data providers you can look at and then just focus on the larger names and you should do well.
So if you want to see more you can screen this QR code. Yeah we also do a our own sentiment index. Uh we published by weekly our crypto breath report where we look how the market is is spreading out not only bitcoin but how are other um altcoins performing in the grand scheme of things and uh yeah I wish you a pleasant day. I'm here for the day. So, uh, talk to me, especially if you, uh, disagree.
That makes normally the best discussions. And, uh, thank you very much. [applause]
Thank you, Martin. I can we stay for one second because we still had a couple of seconds left and there is actually a brief question for you. Maybe you can care to answer really briefly. And yes, always good to be a contrarian, right? Never anything wrong with that.
So someone of the audience was um asking how a specific analysis that you shown um that you've shown was made and what type of methodology was used. I would say could you just briefly elaborate a little bit on your research uh methodology just in general just because we don't know which uh which one it concerned.
Yeah. So um what we did for example with token terminal um we screen really for uh active users over the last 30 days. We screen for uh fees generated over the last 30 days based on the top 50 universe and we build a score out of that and we just select by this core not by market cap and we also weight according to this score that's completely different to what you normally see with a with a top 10 index which is weighted by market cap only. Uh and we also have a square rooting to make sure that this index is a little bit more balanced because when we started that in 2023 and you were just screening for fees, uh Ethereum would have had a weight of over 90%. And then you would have had a very long tail of of smaller altcoins.
We also had or still have Bitcoin at the beginning with a higher weight. But I I expect that to drop out uh with the next cycle because what you see from Bitcoin is that it's not the highest fee generating asset. It still has uh some active users. But I expect when we see this craziness with stable coins, tokenization, AI agents that uh other platforms and digital applications will overtake that. And so what we do here is just a monthly rebalancing uh with some butter in place so that we are not crazy with turnover and that's it.
It's just two simple ratios. Yeah, you get so uh not not super complicated but it works.
That's the best. Not super complicated but it works. Thank you so much Martin. Please give him a round of applause. [music]
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